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Amazon will experience profit pressures from higher wages and growing workforce, says Morgan Stanley


Amazon.com Inc.’s higher wages and larger workforce plans will put pressure on the company’s profits and EBIT, Morgan Stanley said, reducing analysts’ price targets on the e-commerce giant.

Morgan Stanley maintained its overweight stock rating but lowered its price target from $ 4,300 to, 4,100 on Monday’s note.

Amazon stock closed at $ 3,405.80 on Monday, up 1.9% over the year to date. S&P 500 Index SPX,
-1.73%
Gained 16.2% for the period.

Analysts led by Brian Knock wrote, “Our analysis of Amazon’s 1,000,000,000 U.S. logistics workers and rising wages highlights further profit pressures as we reduce ’21 / ’22 EBIT 16% / 19%.”

“We’ve written in the past about how Amazon’s growing logistics staff is set to gain more e-commerce shares, faster ship speeds (1-day and same-day) and new business opportunities (such as third-party delivery) … but cost labor is rising. . ”

Amazon AMZN,
-2.49%
It was announced earlier this month that it wanted to fill 125,000 logistical positions with an average wage of 18 18 per hour and in some places up to 22 22.50.

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Amazon is competing for talent in a tough labor market. Although the company says 1 million people applied for jobs during a recent national recruitment, retaining valuable employees is equally important. Companies are offering higher salaries and more benefits to stay competitive.

“Although this part of the head / wage increase was not much of our previous estimate (2Q: 21 guide-down post) … especially the increased number of heads and the মজ 2 wage increase for new / existing employees in the last five months. , ”Said Morgan Stanley.

Analysts have noticed that this pressure is being felt in Amazon’s competitors and other companies.

“We expect small (in some cases subscale) retailers / players to feel more pressure. For example, it will be increasingly important to keep an eye on growing retail partnerships with third-party logistics players … as they look for economically viable ways to continue to drive / profit from growing e-commerce.

Third parties suggested by Morgan Stanley include Uber Technologies Inc., Uber,
-2.08%
And Dordash Inc. Dash, Inc.
-4.44%

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Going into the holidays, many companies are looking for seasonal workers to help with shopping and online ordering. Among the companies now looking for thousands of new jobs are Macy’s, Inc.
+ 2.45%,
That said last week it was looking for 76,000 employees, with 28,000 positions expected to grow beyond the holiday season.

Morgan Stanley estimates that Amazon’s labor costs will increase by 60% or about 4 4 billion, in the fourth quarter of 2020 and the same period in 2021.



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